In 2004, in Thurman v. DaimlerChrysler, the 6th Circuit upheld an employers right to contractually limit an employee’s timeframe to file a discrimination claim in court. On Monday, in Alonso v. Huron Valley Ambulance, the same court held that such waivers and limitations must be knowing and voluntary to be valid.
Huron Valley Ambulance used two tools to attempt to limit exposure to discrimination and other employment-related claims: a four-step internal grievance process and a six-month statute of limitations. Both are set forth in the employment application:
PLEASE READ THE FOLLOWING BEFORE SIGNING
Any dispute arising out of or in connection with any aspect of my employment by the Company, or termination thereof, including by way of example but not limitation, disputes concerning alleged civil rights violations, breach of contract or tort, shall be exclusively subject to review by the Grievance Review Board. Any decision of the Review Board shall be binding to both parties, and enforceable in circuit court….
I further recognize that if employed by the Company, I agree, in partial consideration for my employment, that I shall not commence any action or other legal proceeding relating to my employment or termination thereof more than six months after the termination of my employment and agree to waive any statute of limitations to the contrary.
Upon starting employment, HVA provided all employees a copy of its Operations Policies and Procedures Manual, which described the Grievance Review Board and its process in detail.
Alan Alonso and Kimberly Alonso both worked for HVA. They read and signed the employment application, and received copies of the Operations Policies and Procedures Manual, for which they signed a receipt. Nevertheless, the 6th Circuit held that HVA could not bind the Alonsos to either the grievance process or the shortened statute of limitations because the waivers of their rights were not “knowing and voluntary.”
The 6th Circuit took no issue with the language used in the waivers or the Alonso’s ability to understand what they signed. Instead, the 6th Circuit was troubled by the lack of information and detail about the Grievance Review Board given to the Alonsos at the time they signed the employment application:
At the time the Alonsos signed waivers of their rights to a judicial forum, they had no idea what the Grievance Review Board process entailed. They were never informed of their right to revoke their waiver. They were not given any documentation regarding the process until almost a month after they began their employment with HVA. Even then, the document they were given described the process in general terms, and pointed them to a website where they could find additional, more detailed information. They cannot be said to have knowingly and voluntarily waived their right to a judicial forum when they were not informed of the alternative procedures until a month after they began working for HVA.
The court glossed over the question of the enforceability of the shortened statute of limitations, simply finding:
Because we have already found that the Alonsos did not knowingly, intelligently, and voluntarily sign the waivers included in their employment applications due to the fact that they were not given any information regarding the Grievance Review Board procedures, we hold that their statute of limitations waivers were, likewise, invalid.
Given the scant analysis of the statute of limitations issue, Thurman v. DaimlerChrysler is likely still good law. Employers should still be able to limit the time in which employees can bring a lawsuit, provided that the waivers meet the requirements of being knowing and voluntary.
What other lessons can employers learn about waivers of judicial rights in employment agreements?
Waivers should be obvious and conspicuous. Both the Thurman court and the Alonso court pointed out that the waivers were set off by headings in all caps and bold type, letting the employees know what they were about to read was important and should be read with care before signing.
Employees should be given time to consider the waiver before signing it, should not be pressured or required to sign the waiver on the spot, and should not be denied the right to seek legal counsel before signing, if they choose.
Waivers should be understandable to those signing them. They should be written plainly and without legalese. Also, employees should be provided waivers in their primary language, or with the services of someone who can translate.
If you are requiring employees to submit disputes to an internal dispute resolution process, you must provide detail about the process at the time the waiver is signed for the waiver to be valid and enforceable.
Waivers remain an effective tool to limit your risk from lawsuits by employees. The Alonso case just creates more work for you and your lawyers in making sure that they will withstand judicial scrutiny.